Intel will supply up to half of iPhone 7 baseband chips, breaking Qualcomm's hold

iPhone 7
Image: Apple

Apple signaled that it plans to incorporate Intel baseband chips into at least some models of the new iPhone 7, a big blow to Qualcomm, which had been supplying the chips exclusively so far.

Apple hinted at the decision at its iPhone announcement on Wednesday, when it disclosed that some models would not support CDMA technology. Qualcomm, having popularized the tech, builds support for CDMA into all its chips – Intel does not.

The news is a long time coming for Intel, which has long been rumored to be a possible iPhone supplier. The manufacturer, a longtime industry leader in personal computer chips, has struggled to make inroads in the mobile market in past years. Now, however, some industry analysts believe Intel could end up supplying chips for up to half of Apple's handsets, according to the Wall Street Journal.

Representatives from Apple, Samsung and Qualcomm all declined to comment on the news, which the Journal first reported citing unnamed sources.

Still, the move was likely motivated by Apple's desire to diversify the supply chain for its key components. Doing so provides Apple with a backup in the case of manufacturing problems, not to mention that it positions the company to seek more competitive pricing and features.

“The last major component that was not dual-sourced was the baseband,” Timothy Arcuri, an analyst at Cowen & Co., told the Wall Street Journal.

Nevertheless, the move is a meaningful setback for Qualcomm. Arcuri estimated that Intel could take in $500-700 million in revenue by the end of 2016, revenue that displaces a percentage of Qualcomm's sales.

Furthermore it eats into Qualcomm's baseband chip market. The company is the leading chipset supplier in the mobile market. 

Indeed, Qualcomm shareholders appear to have already reacted negatively to the news. Qualcomm's stocks fell slightly – about 0.3 percent – after Apple's announcement, but experienced a far bigger drop on Friday, tumbling 2.17 points since the market opened.

Image: Google Finance
For its part, Intel has made steady inroads in the smartphone market. The company has acquired other chip makers to increase its capabilities, hired senior executives from Qualcomm, and announced deals to provide processors to smaller handset makers, even as its mobile business overall continued to struggle.

For more:
- read the Wall Street Journal article

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